Internap Reports Sequential Revenue Growth and Continued Margin Expansion of Data Center Services

The information below is a summary. Click here to view the entire release which includes our unaudited GAAP financial statements and supplemental non-GAAP financial measures.

• Revenue of $80.4 million, down 4% versus the second quarter of 2014
• Data center services revenue of $59.4 million, down 3% versus the second quarter of 2014 and up 1% sequentially
• Segment margin¹ of 59.0%, up 250 basis points year-over-year
• Adjusted EBITDA² of $19.1 million increased 3% versus the second quarter of 2014
• Adjusted EBITDA margin² of 23.8%, up 180 basis points year-over-year

ATLANTA, GA – August 4, 2015 – Internap Corporation (NASDAQ:INAP, news, filings), a provider of high-performance Internet infrastructure services, today announced financial results for the second quarter of 2015.

“We delivered solid financial results for the second quarter of 2015 with revenue and adjusted EBITDA within our guidance range. Data center services returned to sequential revenue growth, while a positive mix shift from higher core colocation, hosting and cloud services resulted in favorable margin expansion,” said Michael Ruffolo, President and Chief Executive Officer of Internap. “Our strategy of providing an integrated platform of high-performance hybrid Internet infrastructure services continues to provide unique, compelling value to our customers. With a keen focus on improved execution, we are confident in our ability to accelerate top-line revenue growth, expand margins and create superior shareholder value.”

Second Quarter 2015 Financial Summary
Revenue

• Revenue totaled $80.4 million in the second quarter, a decrease of 4% year-over-year and flat sequentially. The year-over-year decrease was due to the loss of revenue resulting from customer attrition as we migrated out of the New York metro data center into another facility, the decrease in partner colocation revenue and lower IP revenue, partially offset by organic growth in core data center services revenue. Sequentially, data center services revenue growth offset the decrease in IP services.
• Data center services revenue totaled $59.4 million in the second quarter, a decrease of 3% year-over-year and an increase of 1% sequentially. The year-over-year decrease was primarily due to the loss of revenue from the New York metro data center migration, partially offset by organic growth in core revenues. Partner colocation revenue declined due to our strategy to focus on selling into our company-controlled data centers. The sequential increase was attributable to increased sales of colocation in company-controlled data centers, hosting and cloud services, partially offset by decreased sales in our partner data centers.
• IP services revenue totaled $21.0 million in the second quarter, a decrease of 7% year-over-year and 3% sequentially. Both decreases were driven by a decline in IP pricing for new and renewing customers and the loss of legacy contracts.

Net Loss

• GAAP net loss was $(12.5) million, or $(0.24) per share, compared with $(11.2) million, or $(0.22) per share, in the second quarter of 2014 and $(10.4) million, or $(0.20) per share, in the first quarter of 2015.
• Normalized net loss was $(10.3) million, or $(0.20) per share, compared with normalized net loss of $(7.7) million, or $(0.15) per share, in the second quarter of 2014, and normalized net loss of $(8.6) million, or $(0.17) per share, in the first quarter of 2015.

Segment Profit and Adjusted EBITDA

• Segment profit totaled $47.5 million in the second quarter, flat year-over-year and quarter-over-quarter. Segment margin was 59.0%, an increase of 250 basis points year-over-year and 30 basis points sequentially.
• Data center services segment profit totaled $35.1 million in the second quarter, a 1% increase compared with the second quarter of 2014 and a 1% increase from the first quarter of 2015. Data center services segment margin was 59.0% in the second quarter, up 230 basis points year-over-year and 10 basis points sequentially. An increasing proportion of higher-margin services, specifically colocation sold in company-controlled data centers, hosting and cloud services drove data center services segment profit and margin higher.
• IP services segment profit totaled $12.4 million in the second quarter, a 2% decrease compared with the second quarter of 2014 and a 2% decrease from the first quarter of 2015. IP services segment margin was 58.9% in the second quarter, up 300 basis points year-over-year and 80 basis points sequentially. Lower IP transit revenue and the loss of legacy contracts drove the decrease in segment profit. Lower network costs primarily contributed to the increase in segment margin.
• Adjusted EBITDA totaled $19.1 million in the second quarter, a 3% increase compared with the second quarter of 2014 and a 7% increase from the first quarter of 2015. Adjusted EBITDA margin was 23.8% in the second quarter, up 180 basis points year-over-year and 160 basis points sequentially. Both the year-over-year and sequential increases in adjusted EBITDA and adjusted EBITDA margin were attributable to increased segment profit in our data center services segment and lower cash operating expense³, which outweighed $1.5 million in executive transition costs.

Balance Sheet and Cash Flow Statement

• Cash and cash equivalents totaled $16.4 million at June 30, 2015. Total debt was $372.1 million, net of discount, at the end of the quarter, including $56.9 million in capital lease obligations.
• Cash generated from operations for the three months ended June 30, 2015 was $13.1 million. Capital expenditures over the same period were $15.8 million.

Business Outlook
We are reaffirming the following guidance for full-year 2015:

• Revenue: $331 million – $337 million
• Adjusted EBITDA: $87 million – $93 million
• Capital Expenditures: $70 million – $80 million

Recent Operational Highlights
Historical trends of key financial and operational metrics can be found in a supplementary data schedule on Internap’s website at http://ir.internap.com/results.cfm.

• Internap announced that it was recognized by Gartner in the Magic Quadrant for Cloud-Enabled Managed Hosting, North America.
• Internap announced the immediate availability of its new Managed Internet Route Optimizer™ (MIRO) Controller, an on-premise appliance that helps enterprises and service providers achieve performance level guarantees for their critical applications. MIRO Controller continuously monitors multi-homed (or multi-carrier) networks for latency, packet loss, route stability and congestion and dynamically routes traffic over the fastest path.
• Internap announced the launch of its bare-metal AgileSERVERs on OpenStack, delivering enhanced speed and reliability for applications that require the highest levels of performance consistency. The new bare-metal service on the OpenStack platform provides a high-performance IaaS option for devops teams to deploy mission-critical applications and big-data workloads on OpenStack.
• Internap announced that its OpenStack-powered public cloud, AgileCLOUD, now supports OpenStack Glance image management functionality and Heat orchestration and auto-scaling capabilities. Combined, Glance and Heat will enable enterprises running Web-scale applications to significantly reduce the time and resources needed to manage and scale infrastructure environments.
• We had 11,501 customers at June 30, 2015.

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¹Segment margin and segment profit are non-GAAP financial measures which we define in an attachment to this press release entitled “Non-GAAP (Adjusted) Financial Measures.” Reconciliations between GAAP and non-GAAP information related to segment profit and segment margin are contained in the table entitled “Segment Profit and Segment Margin” in the attachment.

²Adjusted EBITDA, adjusted EBITDA margin and normalized net loss are non-GAAP financial measures which we define in an attachment to this press release entitled “Non-GAAP (Adjusted) Financial Measures.” Reconciliations between GAAP information and non-GAAP information related to adjusted EBITDA and normalized net loss are contained in the tables entitled “Reconciliation of Loss from Operations to Adjusted EBITDA,” and “Reconciliation of Net Loss and Basic and Diluted Net Loss Per Share to Normalized Net Loss and Basic and Diluted Normalized Net Loss Per Share” in the attachment.

³Cash operating expense is a non-GAAP measure which we define in an attachment to this press release entitled “Non-GAAP (Adjusted) Financial Measures.” Reconciliations between GAAP and non-GAAP information related to cash operating expense is contained in the table entitled “Cash Operating Expense” in the attachment.

Conference Call Information
Internap’s second quarter 2015 conference call will be held today at 5:00 p.m. ET. Listeners may connect to a webcast of the call, which will include accompanying presentation slides, on the investor relations section of Internap’s web site at http://ir.internap.com/events.cfm. The call can be also accessed by dialing 866-515-9839. International callers should dial 631-813-4875. An online archive of the webcast presentation will be available for one month following the call. An audio-only replay will be accessible from Tuesday, August 4, 2015 at 8:00 p.m. ET through Monday, August 10, 2015 at 855-859-2056 using replay code 71927309. International callers can listen to the archived event at 404-537-3406 with the same code.

About Internap
Internap is the high-performance Internet infrastructure provider that powers the applications shaping the way we live, work and play. Our hybrid infrastructure delivers performance without compromise – blending virtual and bare-metal cloud, hosting and colocation services across a global network of data centers, optimized from the application to the end user and backed by rock-solid customer support and a 100% uptime guarantee. Since 1996, the most innovative companies have relied on Internap to make their applications faster and more scalable. For more information, visit www.internap.com.

Forward-Looking Statements
This press release contains forward-looking statements. These forward-looking statements include statements related to our ability to accelerate top-line growth, expand margins and create superior shareholder value and our expectations for full-year 2015 revenue, adjusted EBITDA and capital expenditures. Our ability to accelerate top-line growth, expand margins and create superior shareholder value and our expectations for full-year 2015 revenue, adjusted EBITDA and capital expenditures are based on certain assumptions, including anticipated new product launches, our ability to execute on our business strategy, leveraging of multiple routes to market, expanded brand awareness for high-performance Internet infrastructure services and customer churn levels. These assumptions may prove to be inaccurate in the future. Because such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, there are important factors that could cause Internap’s actual results to differ materially from those in the forward-looking statements. These factors include our ability to execute on our business strategy and drive growth; the robustness of the IT infrastructure services market; our ability to achieve or sustain profitability; our ability to expand margins and drive higher returns on investment; our ability to complete expansion of company-controlled data centers within the expected timeframe; our ability to sell into new data center space; the actual performance of our IT infrastructure services; our ability to maintain current customers and obtain new ones, whether in a cost-effective manner or at all; our ability to correctly forecast capital needs, demand planning and space utilization; our ability to respond successfully to technological change and the resulting competition; the availability of services from Internet network service providers or network service providers providing network access loops and local loops on favorable terms, or at all; failure of third party suppliers to deliver their products and services on favorable terms, or at all; failures in our network operations centers, data centers, network access points or computer systems; our ability to provide or improve Internet infrastructure services to our customers; and our ability to protect our intellectual property, as well as other factors discussed in our filings with the Securities and Exchange Commission. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We undertake no obligation to update, amend or clarify any forward-looking statement for any reason.

###The information above is a summary. Click here to view the entire release which includes our unaudited GAAP financial statements and supplemental non-GAAP financial measures.

Press Contact
Mariah Torpey
Davies Murphy Group
781.418.2404
internap@daviesmurphy.com

Investor Contact
Michael Nelson
404.302.9700
ir@internap.com

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